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Telikom PNG Ltd v Independent Consumer and Competition Commission [2007] PGNC 41; N3143 (22 June 2007)

N3143


PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]


WS NO. 1599 of 2006


BETWEEN:


TELIKOM PNG LIMITED
Plaintiff


AND


INDEPENDENT CONSUMER AND COMPETITION COMMISSION
First Defendant


AND


DIGICEL (PNG) LIMITED
Second Defendant


Waigani: Kandakasi, J.
2007: 17 and 18 May
22 June


INTERLOCUTORY INJUNCTION – Principles governing grant or rejection of – No evidence of irreparable damage – Balance of convenience not favouring grant of interim injunction – Undertaking as to damages by or for and on behalf of a company – Not signed under seal of the company – No proper undertaking as to damages – Time of application for injunction a relevant consideration – Failure to act promptly may amount to estoppel by conduct – Application dismissed.


Cases Cited


Chief Collector of Taxes v. Bougainville Copper Limited (02/02/07) SC 853.
Tian Chen Limited v. The Tower Limited (08/11/02) N2313.
Waghi Security Service Pty Ltd v. John Tembon and Western Highlands Provincial Government In Suspension [1994] PNGLR 138.
AGC (Pacific) Ltd v. Woo International Pty Ltd [1992] PNGLR 100.


Counsels:


Mr. I.Molloy, Mr. I. R. Shepherd and Mr. L. Gavara-Nanu Jnr, for Plaintiff/Applicant.
Mr. J.A., M.M. Varitimos and Mr. F. Griffin, for the Second Defendant/ Respondent.
Mr. E. Anderson and Mr. Hollingu, for the First Defendant/Respondent.


22 June 2007


1. KANDAKASI J: On 18th May I handed down my decision in this orally and promised to provide a corrected and detailed version of my reasons for the decision. This is now the promised decision.


2. In pursuance of a Government decision, the Independent Consumer and Competition Commission (ICCC) under its enabling legislation, the ICCC issued a regulatory contract with Telikom, which initially allowed for Telikom’s monopoly in the mobile telephone industry to run to 17 October 2007. The ICCC varied the regulatory contract effectively bringing the deadline for Telikom’s monopoly to 1 April 2007. Telikom claims in these proceedings that the variation was in breach of the regulatory contract and seeks declaratory orders which would effectively nullify Digicel’s license. Pending a trial and conclusion of the substantive matter, Telikom applied for an interim injunction against the ICCC to prevent the ICCC from issuing further licenses and allowing Digicel and another mobile telecommunication company from commencing their operations until 17 October 2007. Digicel and the ICCC oppose Telikom’s application. They argued that there was no serious question to be tried in the substantive proceedings, the balance of convenience does not favour a grant of the injunction Telikom will not suffer any irreparable damage which an order for damages will not adequately compensate and that Telikom failed to give a proper undertaking as to damages.


Relevant Issues


  1. The main issue presented for the Court to determine was whether Telikom’s application met all of the requirements for a grant of an interim injunction? A determination of that issue was dependant on a determination of the following questions:
  2. These issues touched on the very principles governing the grant or no grant of interim injunctive orders or relief. The Supreme Court in Chief Collector of Taxes v. Bougainville Copper Limited[1] restated the relevant principles in the following terms:

"In our jurisdiction the principles relevant to injunctive reliefs are well settled. In Golobadana No 35 Ltd v. Bank of South Pacific Limited (formerly Papua New Guinea Banking Corporation),[2] Kandakasi J., reviewed all of the case authorities on point from Mt. Hagen Airport v. Gibbs[3] and Public Employees Association v. Public Service Commission[4] to subsequent ones like those in Markcal Limited & Robert Needham v. Mineral Resources Development Co. Pty Ltd[5] and AGK Pacific (NG) Ltd v. William Brad Anderson Karson Construction (PNG) Ltd & Downer Construction (PNG) Ltd.[6] His Honour then concluded as follows:[7]


"A reading of these authorities shows consistency or agreement in all of the authorities that the grant of an injunctive relief is an equitable remedy and it is a discretionary matter. The authorities also agree that before there can be a grant of such a relief, the Court must be satisfied that there is a serious question to be determined on the substantive proceedings. This is to ensure that such a relief is granted only in cases where the Court is satisfied that there is a serious question of law or fact raised in the substantive claim. The authorities also agree that the balance of convenience must favour a grant or continuity of such a relief to maintain the status quo. Further, the authorities agree that, if damages could adequately compensate the applicant, then an injunctive order should not be granted."


In addition to the above, there is ample authority in our jurisdiction that, before the Court could grant an interim injunctive relief, the applicant must provide an undertaking as to damages."


  1. Bearing these principles in mind, I dealt with the issues in the order presented, starting with the issue of whether the proceedings present a serious question for trial?

Serious Question


  1. I considered the question of whether the proceedings present a serious question for trial could be answered by reference to the pleadings and the relevant evidence before me then. The parties agreed that as early as 2002, the government informed Telikom that Telikom’s monopoly in the mobile telecommunications sector would come to an end in five years time. A regulatory contract the ICCC issued on 16 July 2002 confirmed that position under the ICCC’s enabling legislation, the Independent Consumer and Competition Commission Act. Under clause 10.1 of the contract, the ICCC agreed not to issue any license under the Telecommunication Act or any other applicable legislation that would permit anyone other than Telikom to operate as a general carrier within a designated operations area or to operate as a mobile carrier before 17 October 2007. In clause 11.1 (b) of the contract, the contract provided for variation of the contract from time to time by written agreement that are consistent with the regulatory principles or the requirements of the ICCC Act and subject to other additional conditions including notice requirements.
  2. In late 2005, the National Executive Council (NEC) through the Chief Secretary invited the Independent Public Business Corporation (IPBC), Telikom and the ICCC as well as PANGTEL to comment on a proposed NEC policy on the introduction of competition in mobile telephone network in PNG. These entities communicated their positions after which the NEC decided on 15 November 2005 to allow for the issuance of two new mobile telecommunications licenses. The decision also directed a variation of the regulatory contract of 2002 to bring forward the end of Telikom’s monopoly period to the end of March 2007. In addition to the gazettal of the NEC decision, the Prime Minister notified Telikom, PANGTEL and IPBC in early December 2005 of the NEC’s decision.
  3. In pursuance of the NEC decision, the ICCC informed Telikom by letter dated 11 January 2006, the precise terms of the proposed variation, which included a provision to end Telikom’s mobile monopoly by 31 March 2007. By letter dated 20 February 2006, Telikom accepted the terms of the proposed variation but added three conditions. The first condition required advance notice to Telikom of the terms and conditions and regulations to apply to competitors. The second condition required fair competition with specific emphasis on provision of mobile services in remote areas. The final condition required Telikom’s competitors to meet similar technical and safety standards as Telikom. By letter dated 24 February 2006, the ICCC accepted the conditions put forward by Telikom.
  4. The 7th of March 2006 saw the production of a document entitled "New Public Mobile Telecommunications Licenses – Invitation to Tender". Then on 15 March 2006, the ICCC amongst others released a draft regulatory contract dated 14 March 2006. On the same day, the ICCC wrote to Telikom, IPBC and PANGTEL and provided the Prime Minister with a brief on the draft regulatory contract. The ICCC followed this through with a letter to Telikom on 6 April 2006 requiring action on a number of technical fronts in the light of ICCC’s intention to issue two new mobile licenses at the end of March 2007. Telikom, PANGTEL and IPBC entered into numerous correspondences with the ICCC between April and June 2006.
  5. On 30 June 2006, ICCC released a draft Interconnection Code of Practice on 30 June 2006. Telikom and the ICCC entered into further correspondence between 30 June and August 2006 on the draft code as well as the draft regulatory contract. The ICCC kept the government informed of all of the steps it was taking to implement the government’s decision to allow competition in the mobile telecommunication industry.
  6. By a media release on 1 September 2006, ICCC informed the public of the successful bidding for the two mobile telecommunication licenses by Digicel and Dawamiba PNG Limited. Telikom by letter dated 6 September 2006, informed the ICCC that the grant of the two mobile telecommunication licenses was in breach of the regulatory contract and the Telecommunications Act and informed that Telikom reserved its right to go to Court for appropriate remedies. By letter dated 7 September 2006, the ICCC denied Telikom’s claims and asked Telikom to enter into discussions with Digicel and Dawamiba being the successful bidders for the two mobile telecommunication licenses. However the evidence before me suggested that Telikom refused to enter into any such discussion.
  7. Telikom claims in the first place that it did not agree to a variation of the regulatory contract of 2002. In the alternative, Telikom claims that the ICCC issued two mobile licenses to Digicel and Dawamiba PNG Limited without complying with the conditions Telikom proposed and ICCC accepted for the variation. In the circumstances, Telikom argues that the grant of the licenses to Digicel and Dawamiba are null and void. On the other hand, ICCC argues that Telikom agreed to a variation of the regulatory contract on ICCC accepting the conditions Telikom set out in Telikom’s letter of 20 February. With regard to the fulfilment of the conditions, the ICCC claims that ICCC complied with all of the conditions on its part. Digicel points out that Telikom by letter dated 9 October 2006 shut out opportunity for Telikom and Digicel to discuss the technical aspects of conditions of variation with a view to meeting all the technical requirements to allow for early competition in the mobile telecommunication industry as per the variation agreement. Digicel and ICCC say further that, if Telikom accepted Digicel’s approaches, all of the technical aspects of the conditions for the variation would have been met by now.
  8. In a statement of agreed and disputed facts with issues for trial settled prior to the joinder of Digicel, between Telikom and the ICCC, the following issues were agreed as the relevant issues for determination by the Court:

(i) to the satisfaction of Telikom; or

(ii) at all?


(d) In light of the answers to the foregoing –

(e) Having regard to clause 10.1(a) of the Regulatory Contract, whether the ICCC may, prior to 17 October 2007, issue a license under the Telecommunications Act or any other applicable legislation to operate as a general carrier or mobile carrier permitting the licensee to commence operations on or after 17 October 2007?


  1. After the joinder of Digicel, additional issues surfaced. They mainly revolved around the equitable doctrine of estoppel by conduct levelled against Telikom by Digicel and Telikom levelling it against Digicel. Parties agree that the key issue in this case is whether the regulatory contract of 2002 was properly varied so as to allow for competition in the mobile telecommunications industry earlier than 17 October 2007? I noted that the other issues were consequential or dependant on a determination of that key question.
  2. I noted that, there appeared to be some basis for the raising of the above issues. I determined that, whether the arguments for and against each of the parties’ position on those issues could be sustained was a matter for trial. Hence these were issues for the trial Court to decide and that I should be careful not to pre-empt a determination of those issues before a proper trial. I was thus satisfied that there were serious issues for trial.

Balance of Convenience and Irreparable Damages


  1. I then turned to the next issue of balance of convenience and irreparable damage which I dealt with together. Telikom argued that the balance of convenience favoured a grant of the injunction. Telikom feared that, if the Court did not grant the injunction it sought, the ICCC would allow Digicel and Dawamiba to commence operation before 17 October 2007, being the agreed deadline to end Telikom’s monopoly. Telikom went on to claim that, a denial of its application would result in major disruption not only to Digicel and Dawamiba but to everyone dealing with them, including subscribers, retailers, lessors and others.
  2. On the other hand, Digicel and the ICCC argued that, if the Court granted Telikom the injunction it applied for, that would result in serious financial loss to Digicel and more importantly, there was the potential of driving out competition in the telecommunications industry in the country, which would be a serious loss to the people of PNG, no order of damages would adequately compensate.
  3. Telikom failed to provide or if not, draw my attention to any particular evidence of its damages or losses it stood to suffer if the Court declined its injunction application. It was clear however, that its loss or damage would be monetary only. I accepted Digicel and the ICCC’s submissions that Telikom’s loss or damage could easily be ascertained by reference to the level of Telikom’s business as at the time of its monopoly and Telikom’s income after the introduction of competition. Such loss or damage can be compensated by an order for damages.
  4. I also accepted Digicel and the ICCC’s arguments that, a grant of the injunction would also result in Digicel suffering substantial economic loss, and deny a good number of people in the country’s employment and spin off business opportunities. There was evidence before me that Digicel had already outlaid K120 million. I expressed the view that, if Telikom acted earlier and prevent ICCC from varying the regulatory contract or otherwise take steps to prevent the ICCC inviting tenders and eventually granting the mobile telecommunication licenses to Digicel and Dawamiba, such capital outlay would have been avoided. I found that it was not a case of Telikom suddenly becoming aware of licenses being issued. Instead, I found that Telikom was kept informed and Telikom was part of the process and only recently had it applied for the injunction which was well after Digicel had made substantial capital outlay.
  5. Also and more importantly, I was persuaded by ICCC and Digicel arguments that, the grant of injunction of the injunction sought by Telikom had the potential of driving out competition which meant better mobile telecommunications services for businesses and individuals in PNG being thrown out. That I found would result in irreparable damages to the people of PNG, both corporate and individuals, in terms of the benefits in better services and prices in mobile telephone communications.
  6. That drew my attention to the case of Tian Chen Limited v. The Tower Limited.[8] There, I made the following observations:

"Further from the evidence of the plaintiff through Mr. Chen, I get the impression that, its intended business out of the rented premises was the plaintiff’s first major undertaking in Papua New Guinea as an investment. It follows therefore that, if the lease is terminated, it will not only result in substantial damages to the plaintiff but a loss of business interest in the country given its experiences with the defendant in this case.


At this time of the history of our country, every opportunity for foreign investment in the country is a much more treasured opportunity then ever before. The economy is in a state of collapse and the country needs much more foreign investment and inflow of foreign currency and exchanges to help rebuild the economy. Discouraging a first time investor or any investor in the country unnecessarily is the last thing any citizen or a government instrumentality or corporation could be allowed to undertake at this time.


What I have just said above also indicates that a termination of the lease and therefore the discouragement of the plaintiff’s business is something that cannot adequately be compensated by any order for damages. It might cause long term damages not only to the plaintiff but also to the country as a whole. I am therefore, of the view that a continuity of the injunctive orders would be more appropriate rather than not."


  1. In that case, there was an application before me for continuity or otherwise for an injunctive order and that was the background from which I made those observations and came to the conclusion as I did. In this case, it was a somewhat similar situation but I contrasted that case with the present. In that case, it was a case of a limited or individual investor, where one or two people were involved directly. The impact of any loss to them and to the country may not have been great. So the country could not have felt it to any greater breath and length. In this case, I found that mobile telecommunications have become almost a fact of life for most if not, many Papua New Guineans and we have only one carrier.

22. I noted that, competition always has the advantage of better pricing and better services and if the injunction was granted, there was the risk of Digicel and the other successful bidder for the license being driven out and therefore competition being put to an end. That I found was a far greater risk not only to the Digicel and other licensee but also the nation. I further found that no order for damages would ever replace the loss if that loss does occur. But I also observed that, here we were not talking about what loss the respondents would suffer through the application. It was about what irreparable damage the applicant stands to suffer if the injunction it was asking for was not granted. There was no evidence of an irreparable damage likely to be suffered by the applicant being Telikom.


23. In all of these circumstances, I was not persuaded that the balance of convenience warranted a grant of the injunction Telikom was applying for. This led me to a consideration of the undertaking as to the damages.


Undertaking as to Damages


  1. In respect of this issue, the ICCC and Digicel argue that, the purported undertaking in this case was not a proper undertaking and therefore there was no undertaking as to damages. The attack was from two fronts, first, the document not being signed under seal of the company and secondly, the form and or wording of the purported undertaking. The argument against that was that, the undertaking was in order because the person who signed the document, the acting managing director of Telikom was sufficient authority to bind the company and that the wording employed in the document was sufficient.
  2. The decision of the Supreme Court in the Bougainville Copper Limited case makes it very clear that there can be no grant of an interim injunction, unless there is an undertaking as to the damages that might be occasioned by a grant of the injunctive orders being applied for. That decision settles the law on the requirements for undertaking as to damages in support of an application for interim injunctive orders. Unfortunately, there is no authority that I am aware of that deals with the question of the form of an undertaking and who must execute it. Except only to argue their respective positions, neither of the parties assisted the Court with any authority on point or that might be of assistance to the Court. In the circumstances, when I handed down the decision, I maintained the view I earlier expressed in the course of arguments by counsel for Telikom that, if a company is giving an undertaking as to damages, in order for that to be binding on the company, that undertaking must be given under seal of the company.
  3. When the seal of a company is affixed, it signifies that the document is for or by the company with its due and proper authority. It immediately gives the impression that the document is for and by the company for all its intents and purposes. Thus, subject only to prove of fraud or serious misrepresentation, the affixing of the seal binds the company. Otherwise, there is always the potential for the argument that the company did not give the undertaking but an individual who did not necessarily have the authority to bind the company at the relevant time. So unless the company’s seal is affixed to an undertaking as to damages, there would be room for that argument. Affixing the company’s seal would put any such argument to rest. In Waghi Security Service Pty Ltd v. John Tembon and Western Highlands Provincial Government In Suspension,[9] Woods J, held that a contract purporting to terminate a security contract between the plaintiff and the Western Highlands Provincial Government was invalid because the purported contract did not have the relevant and appropriate seals of the company and the provincial government.
  4. At the time of handing down the decision of the Court, I was mindful of some decision of the Court that shed some light on the issue then before me but was not able to precisely recall the correct names of the cases and their reference. I have now had a search and have come across the decision of my learned brother Sakora J in AGC (Pacific) Ltd v. Woo International Pty Ltd.[10] There, his Honour ably discusses correctly the twin principles of "ostensible authority" and "indoor management". In summary, these principles, say that it does not matter whether a person executing a document or taking any step or action or inaction for and on behalf of a company binds the company in relation to or as against any third party claims. That is the case whether or not the internal rules and regulations of the company have been followed and or the action or inaction in question had the prior approval or authority of the company. The reason for this is simply that a third party is in no position to know or investigate and ascertain the internal company matters pertaining to the action or inaction under consideration.
  5. Proceeding on the basis of the above principles, I noted that there would be no strict requirement for a company to execute all of its documents under seal. I was however of the view that, in the case of giving an undertaking as to damages and the importance that serves as per the Supreme Court decision in the Bougainville Copper case, the undertaking ought to be under seal of a company. This is necessary for one important reason. The Court hearing an application for injunction has to proceed with the comfort that in the event of any damages occasioned by any injunctive order it may order, will be made good by the party applying for the injunction and that it will not result in any further unnecessary litigation or arguments as to the authority and validity of the undertaking as to damages and just what the undertaking covers.
  6. It is not uncommon in our jurisdiction that the authorities of companies or other legal entities’ representatives have been questioned. There is no guarantee that an undertaking as to damages cannot be the subject of any dispute as to its validity. Many Papua New Guineans have become highly litigious and our courts are being inundated with far too many cases, some, if not all, of which could be avoided with appropriate requirements in the law including the judgments and rules of the Court. If a company seal is not there, it leaves open the door for suggestions that there is a lack of authority for its execution and that the company is not supporting the application, which in turn means additional litigation.
  7. Bearing most of the foregoing in mind, I accepted in the present case the argument put forward by Digicel and ICCC that the undertaking as to damages was not properly given and was thus not properly before me.
  8. At the same time, I noted that, although there was no prescribed form or wording for a proper undertaking as to damages, I was of the view that the fact of giving an undertaking as to damages for the injunction applied must be made clear. I was of the view that the undertaking should have words to the effect "[name of the person or party giving the undertaking] undertakes to pay damages occasioned or otherwise arising out of and consequential on the grant of the injunctive relief applied for in these proceedings." An undertaking in these terms might adequately reflect the fact that any damages occasioned by the injunctive order, for which the undertaking is given, will be paid for without any argument on litigation except as to the measure of the actual damages. The undertaking that was before me in the present case did not make that clear. Counsel for Telikom argued this can be cured by amendment. However, going by the decision of the Supreme Court in the Bougainville Copper case, I expressed the view that, an undertaking as to damages is a critical part of applying for and grant of an injunctive relief. The duty was therefore on the party applying for an injunction to give a proper undertaking in terms of just what it is undertaking to pay in addition to the authority of the person signing the undertaking. So on that front too, I was not persuaded that the undertaking in this case was properly before the Court.
  9. In the end, for all of the foregoing reasons, I found that no case was made out in terms of irreparable damage and balance of convenience favouring a grant of the injunction applied for by Telikom. I also find that the purported undertaking was not in a proper form, at least, in my view, both in terms of its wording and the authority under which it was executed. Accordingly, I ordered a dismissal of the application for injunctive orders or the injunction applied for by Telikom, with costs to the ICCC and Digicel with certification of two overseas counsels’ fees for Digicel. I further ordered an abridgment of time for the entry of those orders.

_____________________________________


Blake Dawson Waldron Lawyers: Lawyers for the Plaintiff/Applicant.
Gadens Lawyers: Lawyers for the First Defendant/ First Respondent.
Young & Willams Lawyers: Lawyers for the Second Defendant/Second Respondent.

[1] (02/02/07) SC 853.
[2] (11/11/02) N2309.
[3] [1976] PNGLR 216.
[4] [1988-89] PNGLR 585.
[5] (05/09/96) N1472.
[6] (4/12/99 or 00) N2062.
[7] At page 12 of the Golobadana Case.
[8] (08/11/02) N2313.
[9] [1994] PNGLR 138.
[10] [1992] PNGLR 100.

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